The EU: Sri Lanka’s Diplomatic Quadrum

U.K.’s war time leader Sir Winston Churchill led the way in calling for European states to come together to build the United Sates of Europe. The objective was to ensure sustainable peace in the region and eventually to bring economic benefit to the member countries. Seventy years later it’s the British Citizens that put the idea in jeopardy by voting to leave the EU, officially known as Brexit.

The decisions taken by the political leaders on both sides in the next two years will determine what happens in Europe for the next fifty years. The EU is being hit by a hail storm, and largely signals a replay of the 1930’s. The Brexit vote has sent shockwaves through Europe. For the U.K. it means unpicking the legal, economical and political complexities of the last 40 years of membership.

But, what will it mean for the rest of Europe? Some political commentators believe, this will herald the start of the end of the European dream, The European Economic Community (ECC) was found in 1957. France, Italy, Germany, Netherlands, Belgium and Luxemburg were all part of the founding nations.

But it took until 1973, for the U.K. to sign-up. Britain has always been a reluctant European. It was the economic success of the ECC that prompted the U.K. to become a member of the Union. The entry of Britain made EU the most powerful trading block in the world, currently representing about 25% of global GDP.

It is worth mentioning the pretext to the formation of the Union and subsequent entry of U.K. was made possible on the back of economic success.

The other main political objective of the EU was to integrate the Eastern European block of nations. These countries were the x-members of the Soviet Union. The idea was to keep Russia at bay in the long-term.

The EU essentially has four powerful economies. Namely, U.K., France, Italy and Germany. Brexit means the exit of its most powerful member. EU economy was valued at $16.5 trillion at the end of 2016. Brexit will wipe out $3 trillion from its size, effectively 20%.

Political Backdrop

For U.K. the European Union was essentially a business/economic project. The idea of creating the United States of Europe was never a consideration. There has always been a notion among the politicians, that U.K. contributed the largest amount of money while other nations had the possibility but abstained. Margaret Thatcher, the conservative prime minister’s government was instrumental in creating the single market economy that it is today. In simple terms it ensured the free movement of capital labour and services among its members.

One of David Cameron’s first agenda was to stamp authority on the conservatives from refraining on complaining on Europe and U.K.’s membership. However, the rise of the Anti Europe U.K.’s independence party led by Nigel Ferrage that pushed Cameron into announcing a referendum on Europe in Britain.

There was huge sense of political drama at the European Summit in February. Cameron was expected to achieve something BIG and something BIG meant a complete reform of the Union’s principals by restricting migration. It was clear from the beginning that he would not get any of this. It is simply not possible to restrict the essence of free movement of labour and people and remain in the single market place.

Cameron came back with a watered down agreement with the EU. Many, political commentators are of the opinion that Cameron never expected to lose the referendum. As things turned out the British voted for the exit and suddenly the EU didn’t look the same. For the first time in the union’s history, failure is looking a genuine possibility and this wave of populism is threatening the existence of the union.

Political landscape of France Italy and Germany

France and Italy are Europe’s third and fourth largest economies respectively. Both economies are currently in a phase of economic stagnation with record unemployment levels. To make matters worse, Italy is in the midst of massive debt trap resulting in fragile financial health. Both countries have recently witnessed a rise in populism.

In France, opposition leader, Marine Le Pen, promises a referendum to leave the EU if elected and has seen a monumental rise in her approval rating for her anti European rhetoric. A poll conducted for Le Monde puts François Hollande’s, the current French president’s approval rating at 4%. With the presidential elections set for this year, it increasingly looks like the French membership in the EU looks ever so uncertain.

The rise of the 5 star political party in Italy has been astonishing to say the least. Beppe Grillo, a popular comedian and blogger, and Gianroberto Casaleggio, a web strategist, on 4 October 2009, formed the party. The widely unpopular immigration problem coupled with the current president, Paolo Gentiloni’s failure to wow Italian’s to his pro EU stance is looming large.

German chancellor Angela Merkel’s decision to allow one million immigrants into Germany resulted in massive protests across Germany. President Donald J Trump’s election campaign often denounced the decision in a political outcry of nationalism. However, it must be noted on the economic front Germany is on a far healthier footing. A devalued Euro is helping its world-class exports industry. Germany has often been accused of using the Euro to stay competitive in the global market place. A sound economy has made Merkel’s job on the political front much easier. Germany remains the only nation that seems to be able to keep the EU together.

The End-Game

The European Union, specially the single market place was largely created on the back of an economic boom post the Second World War. The notion to match America’s economic supremacy and to exert more influence on international trade was the primary objectives.

However, we currently live in very stressful times, both politically and economically. The global economy never really recovered post the 2008 financial crisis. Unprecedented monetary policy measures by the European central bank have failed to spur growth or to raise employment levels.

In such a context, national interests are beginning to override the EU interests, threatening the fundamental principles on which the Union is built.

Unless, there is a military or economic threat to Europe as a whole, which is justifies the co-existence of the members things are looking extremely bleak. It will take a monumental effort from the politicians and policy makers in Brussels to relate to the European masses who are on firm pro exit grounds.

Russia and the European Union

A destabilized Europe is largely in Russia’s interest. The integration of former Soviet Union colonies into the EU has never been appreciated by Russia. A destabilized Europe once gain offers Russia the opportunity to exert its influence on former Soviet states.

The French opposition party leader Marine Le Pen’s recent diplomatic visit to meet Russian president Vladimir Putin is largely seen as a direct Russian influence in the upcoming presidential elections. Putin’s ability to influence the 2016 U.S.A. presidential polls resulted in a Trump victory. The very possibility exists with the fate of the French presidential elections in 2017.

The European Union and Sri Lanka

A post presidential election in January 2015, there has been a fundamental shift in GOSL’s foreign policy. We have witnessed an increasing pro-western stance by the Unity government. The agreement to co-sponsor the UNHCR resolution is a reflection of this stance.

I want my readers to understand that the present government is backing an organization that’s very susceptible. Recent events, have increasingly threatened its mere existence. Sri Lanka’s apparel and fisheries industry are the main beneficiaries of EU trade.

The existence and validity of the trade agreements are largely subject to EU’s existence. With Sri Lanka, on the cusp of an economic revolution does it make sense to further integrate the country with an uncertain economic Block?

The dismantling of the EU will also allow Sri Lanka to negotiate terms of trade on a better footing. Human rights and war crime investigations may no longer take center stage in trade negotiations. Sri Lankan policy makers need to make decisions after considerable consideration.

There is no need to over commit. If the EU falls apart, it will be of great economic values to Sri Lanka. Policy makers need to be smart and opportunistic to derive the best possible outcomes for Sri Lanka from this geo-political uncertainty.

Unfortunately, the current government does not seem to have capable policy makers to take Sri Lanka in the right direction. The over commitment to EU ignoring giants like China is brewing nothing but a long-term economic/political disaster for Sri Lanka.